Consumer, Retail Stocks Tipped To Unlock Saudi Earnings-Season Gains

Investors looking to back winners in Saudi Arabia’s second-quarter earnings season should focus on consumer and retail companies rather than petrochemicals, analysts in the region say.

Extra spending by Saudis after the government’s June 21 decision to reverse a cut to state salaries and benefits, and increased food sales for feasts related to the holy month or Ramadan should boost company revenue figures. Dairy producer Almarai Co. and clothing retailer Fawaz Abdulaziz Al Hokair & Co. are among those set to benefit the most, according to Al Rajhi Capital.

Weaker Product Prices

“We expect consumer-spending related sectors to do well,” said Mazen Al-Sudairi, head of research at Al Rajhi Capital in Riyadh. Petrochemicals should come under pressure because of weaker product prices and a number of plant shutdowns, he said.

Saudi Arabian food and beverage companies’ shares are regarded as among “the most attractive in the region,” according to analysts at Aljazira Capital. Below are some stocks investors should pay attention to before their second-quarter results, according to analysts at Al Rajhi, Aljazira, Arqaam Capital and EFG-Hermes.

Al Othaim Retail could see revenue rise 16% YoY on the back of its focus on non-discretionary products and aggressive store expansions. Fawaz Al Hokair Retail is expected to benefit from Ramadan falling entirely in the 2nd quarter, with revenue expected to grow 4.1% YoY.

Elsewhere, Almarai Food is expected to show strong uptake in its flagship dairy and juice segment.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.